The total active client base of brokers has fallen 10% from its peak at the end of December to 44.35 million at September end and market experts have attributed this fall to seasonal factors and profit-booking by retail investors.
Major discount brokers Groww, Zerodha, Angel One, and Upstox held 63% of the total market share in terms of active clients.
A press release by Groww, attributed this fall to seasonal factors. In its DRHP, the IPO-bound company had noted citing a Redseer Report that broking business is impacted by seasonality, in Fiscal 2024, the Equity and Derivatives’ (Notional for Futures and Premium for Options) turnover on the NSE was 41.09% and 21.94% higher in the second quarter as compared to the first quarter, respectively, and 36.58% and 32.47% higher in the fourth quarter as compared to the third quarter, respectively.
Trivesh D, COO of Tradejini attributed this fall to a sideways direction of market and a cooling effect after post-Covid activity. Markets are expanding even if certain products like weekly Bank Nifty are not available, he said and added that trading in commodities has increased.
In addition to this seasonal fall, various measures by the regulator during this period have also been impacting the business of brokers. This risk of regulators questioning the utility of options turnover has now crystallised with the increase in STT on options and the reduction of expiries to two weekly contracts on options, said Nithin Kamath, founder and CEO of Zerodha in a business update at the end of September.
Along with these, he added, the increase in the BSDA (Basic Services Demat Account) limit, removal of the exchange transaction charges rebate, and a general drop-in market activity, our revenues and profits took a hit last year, as we had expected. “The impact of all these changes started hitting us from October 2024, so the numbers don’t fully reflect in the financial year 2024/25,” he said.
He further said, if the regulator stops weekly options completely, Zerodha would be forced to start charging brokerage for equity delivery trades to make the business tenable, most of its competitors already charge for delivery trades.
The Redseer report exclusively commissioned by and paid for by Groww for its public offer said traditional brokerage houses and banking institutions have accelerated the transformation of their products and services. Simultaneously, many niches domestic players have emerged in the recent past and continue to gain traction. Competitive intensity is expected to continue and current players need to evolve and expand product portfolio and revenue streams for sustained long term growth.
For this Tradejini is focusing on user friendly innovative products like Q+ Analysis for ease of bulk order execution basket mode and Next Option, which helps investor to evaluate risk, back test it and then deploy money.
Groww intends to launch a bouquet of wealth products and services, including advisory with a technology-led and relationship manager service model.
“In addition, recognizing that a key part of a customer’s wealth journey includes accessing credit and liquidity, we have launched loans against security which are loans secured by a customer’s pledge of stocks or mutual funds on our investment platform,” it said.
Meanwhile Zerodha plans to launch instant loan drawdown for pre-approved pledges in next by November end, UPI mandate setup for easy loan repayments by November end, and direct mutual fund pledging through CAMS integration this year.
